Cement exports grow 39pc in four months

LAHORE: Cement sector recorded a 5.4 percent year-on-year increase in sales and exports to 15.353 million tons during the first four months of the current fiscal year of 2018/19, industry data showed on Wednesday.

The domestic uptake paltry increased 0.82 percent during July-October, while exports significantly grew 39.13 percent during the same period, All Pakistan Cement Manufacturers Association (APCMA) said.

A spokesperson of APCMA said exports became competitive only because of a steep decline in rupee value, as dollar increased from around 124 rupees at the start of this fiscal year to 133 on 1 November, showing an appreciation of 7.3 percent in the four months period. Rupee depreciation, however, increased the input costs of imported coal and spare parts consumed by the industry.

Consumption pattern in northern and southern parts of the country highlighted a huge contrast in cement demand in different parts of the country. Cement mills based in northern region usually lead growth, but they suffered so far due to decline in their sales. Cement sales from northern factories fell four percent to 10.244 million tons in the July-October period, while their exports sharply decreased 21.5 percent to 1.010 million tons during the period under review.

In contrast, mills in southern part of the country registered high growth in sales and exports in the first four months. They sold 2.702 million tons of cement, 25 percent higher over the corresponding period a year earlier. Cement exports from southern region climbed 216 percent to 1.397 million tons in July-October.

Slowdown in cement off-takes and increasing input costs hurt the bottom-line of the cement sector but healthy growth in exports from south mills via sea made up for the downward trend.

In October, cement off-take grew 7.45 percent year-on-year to 4.536 million tons. Local sales increased 38.87 percent to 3.921 million tons, while exports rose 3.76 percent to 0.615 million tons.

The cement industry’s profitability declined considerably due to increase in input cost while the construction sector has so far not posted the expected demand. APCMA spokesperson said the industry’s profitability fell 42 percent year-on-year in the first quarter.

The spokesperson urged the government to reduce duties and taxes on cement to improve its local demand and help manufacturers explore foreign markets to earn precious foreign exchange and contribute more to the economy.

Cement industry is heavily taxed. Federal excise duty, which was Rs400/ton (Rs20/bag) in the FY2014, increased to Rs1,500/ton (Rs75/bag) for FY2019. Cement dispatch is subject to general sales tax of 17 percent on maximum retail price, which is Rs86/bag. Other taxes include income tax of 31 percent, workers profit participation fund of five percent, workers welfare fund of two percent, and other provincial levies, including royalty and excise duty. Total taxes on a cement bag are worked out at Rs185/bag, which is 31 percent of Rs600/bag.